Novant Health withdraws from Memorial partnership deal

Monday

May 9, 2016 at 11:10 PM

Jan Skutch

Novant Health Inc. officials on Monday informed Memorial University Medical Center officials they were terminating negotiations on the long-anticipated partnership agreement that Memorial officials have said was a "make or break" deal for the health care provider's future.

"I regret to announce that, after months of negotiations, Novant Health has decided to terminate negotiations of a transaction that would have allowed Memorial to fully join our organization," Novant President/CEO Carl S. Armato told Memorial officials in a one-page memo. "Unfortunately, discussions became more complicated after the Memorial Board approved the (agreement) and the (Chatham County Hospital Authority) became directly involved in the discussions."

Despite early optimism and excitement at the proposed partnership, Armato indicated that contention between the Memorial Health and Chatham County Hospital Authority doomed the effort.

"The Authority has indicated its intent to go beyond its historical role and has insisted upon inserting itself into the detailed oversight of Memorial operations, potentially resulting in inconsistent direction from two differing governing bodies.

"It has become clear to us at Novant Health that there is a lack of alignment among the Authority, the Memorial Board, and the other local stockholders. We do not believe that proposed partnership would be successful in such an environment. Under the approach advocated by the Authority, we would lack the flexibility to implement best practices quickly and meet the demands of the rapidly changing health care landscape."

"Novant committed to support all clinical services, including Level I Trauma and Level 3 (neonatal intensive care unit) with the Member Substitution Agreement and Letter of Intent related to the Chatham County Hospital Authority Lease," Maggie Gill, Memorial president/CEO, said Monday. "We are very disappointed that the community is losing a partnership that would have infused $295 million in capital, supported safety net services and guaranteed the bonds."

"This is very, very disappointing. I think it is a big shame that they refuse to continue to speak to us."

The proposed partnership would have infused $295 million in cash into Memorial over the first 10 years of the agreement and guaranteed $164 million in bonds supported by the Chatham County Commission in 2012.

What started as a deep-pocket nonprofit partnership with the Winston-Salem, N.C.-based group became bogged down in a squabble over the lease arrangements with the Chatham County Hospital Authority and Memorial's board seemingly at odds.

Hospital officials also saw the partnership as a means to provide financial stability for a system that reported more than $22.6 million in net loss last year.

Haslam warned last month that without a "capital partner," Memorial would face some tough decisions including challenges to its balance sheet in the next five years.

Memorial's board unanimously approved the agreement on March 29 in what board chairman Harry Haslam said was "another step in toward our goal."

But four members of Memorial's board who also sit on the hospital authority board - Dr. Frank Rossiter Jr., Dr. Gerald Caplan, Rex Templeton and Art Dana, who was at the meeting by phone - did not participate in the vote on advice of their attorney.

Then on April 15, the Chatham County Hospital Authority unanimously approved a non-binding letter of intent designed to ensure that the proposed partnership protected safety net services in a move toward final agreement. That action allowed the authority to send to Novant an outline of amendments to the 40-year lease that would include assurances that key services - including Level One trauma care and neonatal care - would be maintained throughout the term of the lease.

But also at that meeting about 100 physicians crowded into the meeting room to voice their support for the partnership - a move that plainly irritated Hospital Authority treasurer Dana and several others.

Waters and Dana said the authority was far more than simply a leasing agent for Memorial which leases the property for $1 a year.

They are the protectors of the lease, Waters said.

"We're here to protect this safety net," Waters said. "The lease is what protects the citizens of Chatham County and its nearly half-billion dollars in assets we own."